US Attorney General Eric Holder, along with Department of Housing and Urban Development Secretary Shaun Donovan [official websites] and 49 state attorneys general announced [press release; official website] Thursday that a $25 billion agreement was reached with the nation's five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. This agreement is the largest joint federal-state settlement ever obtained and includes mortgage servicers Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) [corporate websites]. Holder announced:
The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law, which include the use of "robo-signed" affidavits in foreclosure proceedings; deceptive practices in the offering of loan modifications; failures to offer non-foreclosure alternatives before foreclosing on the borrowers with federally insured mortgages; and filing improper documentation in federal bankruptcy court.The agreement will be filed as a consent judgment in the US District Court for the District of Columbia [official website] with servicers required to fulfill the obligations within three years. The agreement does not prevent civil suits by individual homeowners or criminal charges pursued by federal or state authorities. Oklahoma was the only state not to participate in the agreement.
The investigation began [JURIST report] in October 2010 with the forming of a bipartisan group called the Mortgage Foreclosure Multistate Group (MFMG). In June 2010, Countrywide Home Loans, Inc., a subsidiary of Bank of America, reached a $108 million settlement agreement [JURIST report] with the Federal Trade Commission (FTC) [official website] to resolve charges that the subsidiary collected excessive fees from homeowners facing foreclosure. In September 2010, a federal judge refused to dismiss a suit [JURIST report] against American International Group (AIG) [corporate website], and in August, a federal judge rejected a $75 million settlement [JURIST report] between Citigroup and the US Securities Exchange Commission (SEC) [official website] because the two companies misled investors. In 2009, the US Senate [official website] rejected a bill [S 896 materials] that would have aided homeowners in foreclosure [JURIST report] by allowing bankruptcy judges to modify mortgages from lenders that had not already offered better terms to their borrowers.